Cost of a machine is Rs 135000 residual value is 5000 Useful life 10 years the company chrged depreciation for the first 5 years on straight line method Later on it reviewed the useful life and decided to take it as useful for another 8 years depreciation amount for 6th year will be ?
a) 8125
b) 8000
c) 8200
d) none of the above
ans : a)8125
please explain how to solve
straight line method depriciation = 135000-5000=130000/10=13000
less: residual value 5000
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8000
plus: from 5 yrs to 8 yrs is 3 yrs
therefore,first 5 yrs cube is 5^3 125
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total 8125
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Depreciation for first 5 years = (135000-5000)/10 = 13000 per year.
Therefore book value of the machine after five years is 1,35,000 - 5*13,000= 70,000
now the new useful life is 8 years, book value of machine is 70,000 and scrap value is 5,000.
hence depreciation for next year = (70,000-5,000)/8 = 65,000/8 = 8125
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